People often ask me what difference Modern Monetary Theory (MMT) would actually make in practice.

The surprising answer is that, in many respects, MMT already describes how the UK monetary system actually works. The government already creates new money when it spends, through the Bank of England. Taxes do not fund spending in the way most politicians and economists claim. Instead, they remove money from circulation and help manage inflation.

So if that’s already true, what difference does MMT make?

The answer is that it changes how we think about policy.

Using the current debate over defence spending as an example, I explain why cancelling infrastructure projects to “pay for” defence makes no economic sense. Roads are built by different people with different skills from those who design advanced military equipment. Destroying one part of the economy does not magically create capacity somewhere else.

The real constraint is never money.

It is always people, skills, technology, energy and other real resources.

MMT encourages governments to ask the right question: do we have the resources to do this? If we do, then financing them is not the obstacle politicians pretend it is.

This changes everything from defence to healthcare, housing, climate policy and public investment.

Whether you agree with me or not, this is one of the most important economic debates taking place today.

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